Jim Rooney, executive director of MCCA outside the Boston Convention and Exhibition… more

A new analysis of the Boston Convention and Exhibition Center's planned expansion in the city’s Seaport District claims that the buildout will ultimately cost the state $5 billion in lost revenue for roads, schools and other public services over a 16-year span.

According to The Pioneer Institute, the Boston-based think tank that authored Monday’s report, the Massachusetts Convention Center Authority’s proposal to finance a 1.3 million-square-foot addition to the BCEC will result in billions in state tax and surcharge revenue to be diverted from the commonwealth’s coffers. The financing plan is expected to last for decades, or until all of the bond debt associated with the expansion is retired.

Jim Rooney, executive director of MCCA outside the Boston Convention and Exhibition… more

The BCEC’s founding legislation in 1997 drew from a series of revenue sources, including additional taxes and surcharges on area hotels, rental car rates and tourist trolleys, to fund the construction of the 2.1 million-square-foot exhibition and convention center in the city’s South Boston neighborhood.

While the convention center officially opened in 2004, its financing arrangement was to last through 2034, according to Pioneer. At that point, according to Pioneer’s analysis, all of the diverted hotel, car rental and trolley tax revenue is expected to revert back to the state’s general fund.

Charlie Chieppo, a senior fellow at Pioneer and the author of the BCEC report, said the plan to expand the convention center by some 60 percent will require an extension of that financing arrangement through 2050. He said the move will ultimately cost the state’s general fund around $5 billion in lost tax revenue, or around $312 million per additional year, in the interim.

Pioneer's analysis was based solely on the buildout's financing and not the additional economic impact that might result from an expanded facility.

“These decisions have to be made with real information,” said Chieppo, a former member of the MCCA board. “The BCEC expansion plan is akin to pushing out the date for fully funding public pension liabilities. The annual cost doesn’t change, but because we would pay for far longer, the overall cost goes through the roof.”

In an emailed statement, MCCA spokesman Mac Daniel called Pioneer’s analysis “a false conclusion” since the BCEC’s founding legislation never specified that the diverted hotel and related revenue used for its construction be returned to the state’s general fund after 2034. He said the BCEC’s planned expansion will not require any new taxes and will be completely financed from existing revenue sources.

“We have not been contacted by the Pioneer Institute regarding this analysis and have not seen any study,” Daniel wrote to the BBJ Monday. “All we can say at this point is that this is the same group that was wrong and predicted the worst when the BCEC was proposed back in the '90’s and they will be wrong again.”

The Pioneer analysis comes just months after MCCA CEO Jim Rooney told a panel of state lawmakers that the proposed expansion is needed to accommodate a surge in demand among convention planners. The BCEC expansion is separate from another plan spearheaded by Rooney to build a 1,500-room hotel complex on land adjacent to the BCEC.

The MCCA said the hotel expansion is expected to cost around $700 million and that it will be “mostly privately financed.” The MCCA has not provided an estimate as to the amount of taxpayer funding that will likely be needed to complete the project.

Founded in 1982, the MCCA is an independent public authority of the state that owns and operates a handful of exhibit and tourism related assets including the BCEC; the John B. Hynes Veterans Memorial Convention Center; the MassMutual Center in Springfield; and the Boston Common Garage.

Daniel said the initial $850 million investment that helped open the BCEC in 2004 has netted the state $5.6 billion in “economic impact” over the past decade.

In the fiscal year that ended June 30, the Massachusetts Convention Center Authority posted a net operating loss of $71.5 million on revenue of around $51 million. The authority’s net loss the prior year was $64.9 million on revenue of about $50 million. For the past two fiscal years, the BCEC's net operating loss has averaged around $6.5 million.

As of Jan. 1, 2013, the most-recent valuation date available, the MCCA’s pension was 69 percent funded, resulting in a $9 million unfunded obligation, while its retiree health-care obligation of $10.6 million was 100 percent unfunded.